Investment Rating - Industry Rating: Outperform the market (maintained rating) [5] Core Viewpoints - The national childcare subsidy policy, effective from January 1, aims to alleviate family childcare cost pressures by providing a basic subsidy of 3,600 yuan per child per year for children under three years old. This initiative is expected to stimulate birth rates and promote long-term healthy population structure in China [2][3]. - The estimated annual expenditure on the national childcare subsidy policy could exceed 100 billion yuan, assuming a steady state of 10 million newborns per year, which would significantly help families manage childcare costs [3]. Summary by Relevant Sections - **National Childcare Subsidy Policy**: The policy includes various local implementations, such as one-time subsidies and monthly allowances for families with multiple children, which collectively aim to encourage higher birth rates [2][3]. - **Projected Impact**: The report anticipates that the subsidy will not only reduce the financial burden on families but also contribute to a healthier demographic trend in the long run [3]. - **Market Performance**: The pharmaceutical and biotechnology sector is expected to outperform the market, reflecting positive sentiment towards the industry amidst supportive government policies [5].

Group 1 - The total fertility rate (TFR) in China has been declining, reaching approximately 1.0 in 2023, which is among the lowest in major economies globally [2][12][15] - The number of women of childbearing age is decreasing, with projections indicating a reduction of over 16 million by 2025 compared to 2020, contributing to downward pressure on future birth rates [16][20] - The Chinese government has initiated a series of policies to support childbearing, including the establishment of a cash subsidy system for families with children under three years old, aimed at increasing birth rates [3][24][27] Group 2 - The child-rearing subsidy policy framework in China has evolved into a progressive model that includes support for childcare infrastructure, economic relief, and direct cash subsidies [3][24] - Local governments have been innovating in subsidy policies, with various models emerging, such as monthly cash payments and tax deductions for childcare expenses [28][29] - The experience of low-fertility countries like Japan and South Korea provides valuable lessons for China, particularly in terms of increasing family-related social spending to improve birth rates [36][37]

Group 1: Investment Opportunities under Childcare Subsidy Policy - The government work report for 2025 emphasizes the formulation of pro-natalist policies, issuance of childcare subsidies, and development of integrated childcare services, which will marginally impact the maternal and infant products, early education, and assisted reproduction industries [2][9] - Cash subsidies will directly reduce the cost of childbirth and strengthen the expectation of stabilizing birth rates, while the released purchasing power will prioritize activating essential maternal and infant consumption [2][9] - The integration of childcare services is expected to accelerate the expansion of early education supply and market segmentation [2][9] Group 2: Maternal and Infant Products - The maternal and infant products market is projected to grow continuously, with food, clothing, and daily necessities being the main consumption categories, reaching a market size of 4.68 trillion yuan by 2025, with a year-on-year growth rate exceeding 7% [3][13] - Despite a declining birth rate, the increase in disposable income and consumption capacity of maternal and infant families will sustain market growth [3][13] - The online maternal and infant consumption share is expected to rise from 33.8% in 2021 to 39.0% by 2025, indicating a shift in consumer behavior towards online shopping [13][20] Group 3: Early Education - The early education and childcare market is expected to expand due to policy support, with the market size projected to reach 151.81 billion yuan in 2024 and further increase to 232.31 billion yuan by 2030 [4][22] - The 2025 National Childcare Service Quality Improvement Action emphasizes the integration of medical and educational services, standardization, and talent cultivation, indicating strong government support for the childcare industry [4][22] - The focus on improving the quality of childcare services will enhance the overall market environment and growth potential [4][22] Group 4: Assisted Reproduction - The penetration rate of assisted reproduction services is gradually increasing, with the market size in China expected to grow from 140 billion yuan in 2014 to 496 billion yuan by 2023, reflecting a compound annual growth rate of 14.5% [5][27] - The global assisted reproduction services market is projected to grow from 20.4 billion USD in 2014 to 31.7 billion USD by 2023, driven by rising infertility rates and increased awareness of reproductive health [5][27] - The demand for assisted reproduction services is expected to rise as childcare subsidies potentially enhance overall fertility willingness [5][27]

Core Insights - Hohhot City has introduced unexpected child-rearing subsidy policies, with a subsidy of 100,000 for the third child [1] - As of May 18, 2,830 applications for child-rearing subsidies have been submitted, with 1,901 for the first child, 869 for the second child, and 60 for the third child and above [1] - The policy has received widespread acclaim, with 725 subsidies already disbursed and a significant increase in inquiries about relocating to Hohhot [1] Policy Implementation - The implementation of the child-rearing subsidy policy has met expectations, with a high level of public participation and positive feedback [1] - The local government will closely monitor the effects of population aggregation policies and adjust them based on fiscal and social support capabilities [1] Population Attraction - The child-rearing subsidy policy has enhanced the attractiveness of Hohhot for incoming populations, as indicated by the increased number of inquiries about relocating [1] - The city plans to introduce more policies to encourage childbirth and promote high-quality population development [1]

Investment Rating - The report maintains an "Overweight" rating for the industry, consistent with the previous rating [2]. Core Insights - The implementation of child-rearing subsidies in Hohhot is expected to benefit leading consumer brands, as the policy gradually takes effect [4]. - The report highlights three main investment themes: 1. **Children's Clothing Sector**: Recommended stocks include Semir Apparel (with the leading children's brand Balabala), HLA (with the English children's brand), and Jin Hong Group (operating the Teenie Weenie brand). The projected PE ratios for 2025 are 14X, 16X, and 9X respectively, with Semir and HLA both offering a dividend yield of 6% [8]. 2. **Personal Care Sector**: Recommended stocks are Weigao Medical (with the All Cotton Times maternal and infant product line) and Haoyue Care (offering both self-branded and OEM baby products), with projected PE ratios of 28X and 12X for 2025 [8]. 3. **Millet Economy**: Recommended stocks include leading toy brand Blokus (with a projected PE of 35X for 2025) and stationery leader Morning Glory (with a projected PE of 14X for 2025). Beneficiary stocks also include Chuangyuan Co., Guangbo Co., Qixin Group, and Mubang Gaoke [8]. Summary by Sections - **Policy Impact**: The new child-rearing subsidy program offers significant financial support, with subsidies of 10,000 CNY for the first child, 50,000 CNY for the second, and 100,000 CNY for the third, disbursed annually [8]. - **Market Outlook**: The gradual rollout of pro-natalist policies is expected to boost consumer demand in the children's clothing and personal care sectors, leading to a recovery in valuations for many consumer leaders currently trading at relatively low multiples [8]. - **Earnings Forecasts**: The report includes a table of earnings forecasts and valuations for listed companies, indicating expected earnings per share (EPS) and price-to-earnings (PE) ratios for 2024, 2025, and 2026 [9].